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HomeMy WebLinkAboutRDA Agenda Packet 041409CITY OF ATASCADERO COMMUNITY REDEVELOPMENT AGENCY AGENDA Tuesday, April 14, 2009 REGULAR SESSION 6 00 P M City Hall Council Chambers 6907 EI Camino Real Atascadero, California REGULAR SESSION 6 00 P M ROLL CALL. Chairperson O'Malley Vice Chairperson Kelley Board Member Beraud Board Member Clay Board Member Fonzi APPROVAL OF AGENDA. Roll Call COMMUNITY FORUM (This portion of the meeting is reserved for persons wanting to address the Board on any matter not on this agenda and over which the Board has jurisdiction Speakers are limited to three minutes. Please state your name and address for the record before making your presentation The Board may take action to direct the staff to place a matter of business on a future agenda. A maximum of 30 minutes will be allowed for Community Forum, unless changed by the Board ) A. CONSENT CALENDAR (All items on the consent calendar are considered to be routine and non -controversial by City staff and will be approved by one motion if no member of the Agency Board or public wishes to comment or ask questions If comment or discussion is desired by anyone, the item will be removed from the consent calendar and will be considered in the listed sequence with an opportunity for any member of the public to address the Agency Board concerning the item before action is taken DRAFT MINUTES Agency meeting draft minutes are listed on the Consent Calendar for approval of the minutes Should anyone wish to request an amendment to draft minutes, the item will be removed from the Consent Calendar and their suggestion will be considered by the Agency Board If anyone desires to express their opinion concerning issues included in draft minutes, they should share their opinion during the Community Forum portion of this meeting ) 1 Request for Transfer of Marketing Agreement by Carlton Hotel Inc. LLC ■ Fiscal Impact: None ■ Recommendation. Agency adopt the Draft Resolution approving the transfer of the Marketing Agreement for downtown Atascadero and the City of Atascadero from the Carlton Hotel Investments, LLC, to James E Smith and Clifford Branch [Agency Counsel] B PUBLIC HEARINGS None. C MANAGEMENT REPORTS 1 Update on Colony Square and Loan Guarantee Agreements ■ Fiscal Impact: If the Board decides to invest in the Project, up to $1.5 million of Redevelopment Agency funds would be pledged ■ Recommendations. Agency - 1 Receive update on the Colony Square Project; and, 2 Approve as to form the Loan Guarantee Agreement between the Atascadero Redevelopment Agency and Mission Community Bank, and, 3 Approve as to form the Reimbursement and Indemnification Agreement between the Atascadero Redevelopment Agency and James Harrison and Peter Hilf, the owners of the Colony Square project. [Executive Director] BOARD ANNOUNCEMENTS AND REPORTS (On their own initiative, the Board Members may make a brief announcement or a brief report on their own activities Board Members may ask a question for clarification, make a referral to staff or take action to have staff place a matter of business on a future agenda. The Board may take action on items listed on the Agenda.) D ADJOURNMENT TO CITY COUNCIL MEETING ITEM NUMBER RA A-1 DATE 04/14/09 Community Redevelopment Agency of Atascadero Staff Report - Agency Counsel Request for Transfer of Marketing Agreement by Carlton Hotel Inc. LLC RECOMMENDATION Agency adopt the Draft Resolution approving the transfer of the Marketing Agreement for downtown Atascadero and the City of Atascadero from the Carlton Hotel Investments, LLC, to James E Smith and Clifford Branch REPORT -IN -BRIEF The Atascadero Community Redevelopment Agency (Agency) has received a request from the Carlton Hotel Inc , LLC (Carlton) to transfer the Marketing Agreement entered by the Agency and the Carlton on August 12, 2003 to James E Smith and Clifford Branch The Draft Resolution attached to this staff report would approve the proposed transfer DISCUSSION The Agency received a request from the Carlton for the Agency to consent to the transfer of the Marketing Agreement for Downtown Atascadero and the City of Atascadero, dated August 12, 2003 (Marketing Agreement), a true copy of which is attached hereto The proposed transfer is by the Carlton to James E Smith, Trustee of the James E Smith Law Firm 401k Profit Sharing Plan as to an undivided 50% (Smith) and Clifford Branch, Trustee of the Clifford Branch Trust dated January 11, 2006, as to an undivided 50% (Branch) (Smith and Branch are collectively referred to as Transferees) ITEM NUMBER RA A-1 DATE 04/14/09 Paragraph 4 of the Marketing Agreement reads as follows "4 Carlton Hotel shall not assign or transfer any interest in this contract whether by assignment or novation to any person without the prior written consent of Agency, which consent shall not be unreasonably withheld, conditioned or delayed " Billboards in the City of Atascadero are governed by Atascadero Municipal Code Title 9, Chapter 15 entitled "Signs " Code Section 9-15 003(d)(1) prohibits billboards in the City of Atascadero, subject to certain exemptions Code Section 9-15 003(c)(14) "Exempt Signs" provides for an exemption from the billboard prohibition and reads as follows "(14) Redevelopment Projects Any sign program approved and entered into by the Community Redevelopment Agency so long as the program is otherwise consistent with the General Plan of the City of Atascadero " The Marketing Agreement was entered pursuant to the provisions of Atascadero Municipal Code 9-15 003(c)(14) as a program of the Agency to market downtown Atascadero and the City of Atascadero If the Marketing Agreement is terminated for any reason, then the billboards referenced in the Marketing Agreement must be removed as the billboards would no longer be an authorized exemption to the prohibition on billboards unless there is another Agreement entered by the Agency pursuant to Atascadero Municipal Code Section 9-15 003(c)(14) ALTERNATIVES The Agency could refuse to approve the proposed transfer if the Agency finds a reasonable basis for refusing the request for transfer in which event direction should be given to staff to return to the Agency with a draft Resolution denying the requested transfer FISCAL IMPACT None ATTACHMENTS 1 Current Marketing Agreement 2 Draft Resolution Attachment 1 Ifte nimunity Redevelopment Agenc of Atascadero Contract i� 9;1 --14903 MARKETING AGREEMENT FOR DOWNTOWN ATASCADERO and CITY OF ATASCADERO BETWEEN THE COMMUNITY REDEVELOPMENT AGENCY OF ATASCADERO AND CARLTON HOTEL INVESTMENTS, LLC. This Agreement, ("Agreement") is made on & 4— , 2003 by and between the Community Redevelopment Agency olkascadero ("Agency"), and Carlton Hotel Investments, LLC, a California Limited Liability Company ("Carlton Hotel") 1 The term of this Agreement shall be for a period of fifteen (15) years, commencing on /cl , 2003 (the "Initial Term"). Carlton Hotel shall have the option to And the Initial Term for two (2) successive terms of seven (7) years each. A. Termination. This Agreement may be terminated prior to the end of the then existing term as follows 1 Upon the Carlton Hotel ceasing operation, unless this Agreement is extended by mutual agreement of the parties, 2. Upon loss of State entitlements for Billboards one (1), two (2) and three (3) and the subsequent removal or dismantling of the above referenced billboards. 3 Termination of this Agreement shall be accompanied by removal of billboard display materials promoting Downtown Atascadero and the City of Atascadero 2. Agency appoints and designates Carlton Hotel as its agent to market Downtown Atascadero and City of Atascadero through the use of three (3) -highway advertising billboards within the city limits of the City of Atascadero `"eommunity Redevelopment Agency of Atascadero Contract 3 Carlton Hotel, at its sole expense, shall obtain appropriate sites, obtain all entitlements including but not limited to State and local permits, and provide for the construction, maintenance and ownership and/or leasehold of three highway - advertising billboards as described below - A. Billboard #1 (Exhibit A) shall be constructed on property located at 2600 El Camino Real located east of State Highway 101 The billboard sign faces shall be a maximum of fourteen (14) feet in height, forty (40) feet in width, and the structure shall be a maximum of thirty-five (35) feet in height. The southbound sign face pursuant to Section 3.E below, shall contain a display promoting the Carlton Hotel. The southbound face shall also include an "extension/tag-on sign" to promote Downtown Atascadero and/or City of Atascadero. Dimensions for the "extension/tag-on sign" shall be forty feet wide by three feet high (40'x 3'). The northbound sign face shall be leased by the owner for advertising pursuant to Section 3 G of this Agreement. B Billboard #2 (Exhibit B) shall be constructed along State Highway 101 in the southerly portion of the City on property located at 8981 La Lima Street. The billboard sign faces shall be a maximum of fourteen (14) feet in height, forty (40) feet in width, and the structure a maximum of thirty-five (35) feet in height. The northbound sign face shall contain a display promoting the Carlton Hotel. The northbound face shall also include an "extension/tag-on sign" to promote Downtown Atascadero and/or City of Atascadero Dimensions for the "extension/tag-on sign" shall be forty feet wide by three feet high (40'x 3') The southbound sign face may be leased by the owner for advertising pursuant to Section 3 G of this Agreement. C Billboard #3 (Exhibit C) shall be constructed along State Highway 101 in the northern portion of the City on property located at 1516 El Camino Real east of Highway 101 The billboard sign faces shall be a maximum of fourteen 2 r.rver Community Redevelopment Agency of Atascadero Contract (14) feet in height, forty (40) feet in width, and the structure a maximum of thirty-five (35) feet in height. The southbound sign face shall contain a display promoting the Carlton Hotel. The southbound sign face shall also include an "extension/tag-on sign" to promote Downtown Atascadero and/or City of Atascadero. Dimensions for the city "extension/tag-on sign" shall be forty feet wide by three feet high (40'x 3') The northbound sign face may be leased by the owner for advertising pursuant to Section 3 G of this Agreement. D The sign faces shall be maintained at all times in good condition, reasonable wear and tear excepted, by Carlton Hotel at its sole expense and Carlton Hotel shall change the signs and "extension/tag-on" signs periodically at its sole expense. "Extension/tag-on" signs, if requested by Agency, shall be changed no less than 4 times a year, and no more than 8 times a year to promote Downtown Atascadero or City of Atascadero events and marketing campaigns. E. Carlton Hotel agrees not to allow any advertising of Tobacco, Pornography, Profanity, and Alcoholic Beverages (except Wine, Winery Tasting Rooms or Vineyards) on any sign face. F Any illumination of signs shall be installed under the sign, diverted upward and shall be confined to the billboard face(s) and shall not cause any glare to vehicular traffic or other properties. Illumination systems shall be kept in good working order at all times for dusk -to -dawn illumination. K1 Community Redevelopment Agency of Atascadero Contract G Prior to issuance of sign permits, Carlton Hotel shall provide certificates of site control and consent by the owners of all sites to the termination provisions of this agreement. The owners shall agree that they will be estopped from asserting any right to maintain the billboards in the event of any default described in paragraph 10 below 4 Carlton Hotel shall not assign or transfer any interest in this contract whether by assignment or novation, to any person without the prior express written consent of Agency, which consent shall not be unreasonably withheld, conditioned or delayed. 5 Carlton shall indemnify, defend, and hold harmless the Agency, its officers, officials, agents and employees from and against any and all claims, damages, liability costs, losses, and expenses including without limitation to court costs and reasonable attorney's fees arising out of or in connection with the Carlton Hotel's negligent performance of work here under or its negligent failure to comply with any of its obligations contained in this Agreement, except for any loss or damage which was caused by the negligence or willful misconduct of the Agency 6 This Agreement may be amended only by a writing signed by each of the parties. 7 If any term or provision hereof shall be held invalid or unenforceable, the remainder of this Agreement and any application of the terms and provisions thereof shall not be affected thereby, but shall be valid and enforceable. 8 The waiver of any breach of any of the provisions of this Agreement by Agency shall not be a continuing waiver or a waiver of any subsequent breach by Carlton Hotel either of the same or any other provisions of this Agreement. 9 Time is of the essence of this Agreement 4 *AW W Community Redevelopment Agency of Atascadero Contract 10 The express permission of the Community Redevelopment Agency of Atascadero and the City of Atascadero for CARLTON Hotel Investments LLC to own, operate and lease the aforementioned billboards is immediately revocable upon any of the following events - A. Failure by CARLTON Hotel Investments LLC to complete construction of hotel project by December 31, 2004, B Failure to open and operate hotel by April 30, 2005, or C Closure of hotel, after opening, lasting longer than 6 months. 11 Miscellaneous Provisions. A. The Carlton Hotel shall designate a project manager who at all times shall represent the Carlton Hotel before the Agency on all matters relating to this Agreement. B The Carlton Hotel shall keep itself fully informed of, shall observe and comply with, and shall use reasonable efforts to cause any and all persons, firms or corporations employed by it or under its control to observe and comply with, applicable federal, state, county and municipal laws, ordinances, regulations, orders and decrees which in any material manner affect those engaged or employed on the work described by this Agreement or the materials used or which in any way affect the conduct of the work. C Carlton Hotel shall not engage in unlawful employment discrimination, which in any manner affect those engaged or employed on the work described by this agreement. Such unlawful employment discrimination includes, but is not limited to, employment discrimination based upon a person's race, religious creed, color, national origin, ancestry, physical handicap, medical condition, marital status, gender, citizenship or sexual orientation. Community Redevelopment Agency of Atascadero Contract D This Contract shall be interpreted and governed by the laws of the State of California. Any action arising out of this Contract shall be brought in San Luis Obispo County, California, regardless of where else venue may lie. IN WITNESS WIIEREOF, the parties have executed this Agreement as of the date first written above. COMMUNITY REDEVELOPMENT AGENCY of ATASCADERO By. _ 0& , Wade G McKinney, Executive I rector Date APP VED AS F RM B Roy1rafy, City/Agen Counsel ATTEST By: O/U't Marcia Torgerson, City Clerk CARLTON Hotel Investments, LLC Californ' Limited Liab 't ompany By- Title yTitle Date Attachment 2 DRAFT RESOLUTION A RESOLUTION OF THE CITY OF ATASCADERO COMMUNITY REDEVELOPMENT AGENCY APPROVING THE TRANSFER OF THE MARKETING AGREEMENT FOR DOWNTOWN ATASCADERO AND THE CITY OF ATASCADERO THE ATASCADERO COMMUNITY REDEVELOPMENT AGENCY RESOLVES AS FOLLOWS SECTION 1 The Agency finds as follows A. The Atascadero Community Redevelopment Agency (Agency) has received from Carlton Hotel Investments, LLC (Carlton) a request for the Agency to consent to the transfer of the Marketing Agreement for Downtown Atascadero and the City of Atascadero, dated August 12, 2003 (Marketing Agreement), a true copy of which is attached hereto as Exhibit "A", and hereby incorporated by this reference. B The proposed transfer is by the Carlton to James E. Smith, Trustee of the James E. Smith Law Firm 401k Profit Sharing Plan as to an undivided 50% (Smith) and Clifford Branch, Trustee of the Clifford Branch Trust dated January 11, 2006, as to an undivided 50% (Branch) (Smith and Branch are collectively referred to as Transferees) C Paragraph 4 of the Marketing Agreement reads as follows "4 Carlton Hotel shall not assign or transfer any interest in this contract whether by assignment or novation to any person without the prior written consent of Agency, which consent shall not be unreasonably withheld, conditioned or delayed." D Billboards in the City of Atascadero are governed by Atascadero Municipal Code Title 9, Chapter 15 entitled "Signs" E. Atascadero Municipal Code Section 9-15 003(d)(1) prohibits billboards in the City of Atascadero, subject to certain exemptions F Atascadero Municipal Code Section 9-15 003(c)(14) "Exempt Signs" provides for an exemption from the billboard prohibition and reads as follows "(14) Redevelopment Projects. Any sign program approved and entered into by the Community Redevelopment Agency so long as the program is otherwise consistent with the General Plan of the City of Atascadero " G The Marketing Agreement was entered pursuant to the provisions of Atascadero Municipal Code 9-15 003(c)(14) as a program of the Agency to market downtown Atascadero and the City of Atascadero H. If the Marketing Agreement is terminated for any reason, then the billboards referenced in the Marketing Agreement must be removed as the billboards would no longer be an authorized exemption to the prohibition on billboards unless there is another Agreement entered by the Agency pursuant to Atascadero Municipal Code Section 9- 15 003(c)(14) SECTION 2 The Agency hereby approves the proposed transfer of the Marketing Agreement from the Carlton to Transferees On motion by Board Member and seconded by Board Member , the foregoing Resolution is hereby adopted in its entirety on the following roll call vote AYES NOES ABSENT ADOPTED• ATASCADERO COMMUNITY REDEVELOPMENT AGENCY Tom O'Malley, Agency Chairperson ATTEST Marcia McClure Torgerson, C.M.C., Board Secretary APPROVED AS TO FORM. Brian A. Pienk, Agency General Counsel ITEM NUMBER RA C-1 DATE. 04/14/09 Community Redevelopment Agency of Atascadero Staff Report - Executive Director Update on Colony Square and Loan Guarantee Agreements RECOMMENDATIONS 1 Receive update on the Colony Square Project; and, 2 Approve as to form the Loan Guarantee Agreement between the Atascadero Redevelopment Agency and Mission Community Bank, and, 3 Approve as to form the Reimbursement and Indemnification Agreement between the Atascadero Redevelopment Agency and James Harrison and Peter Hilf, the owners of the Colony Square project. DISCUSSION One of the City's primary goals is to stimulate economic development, particularly in the downtown area. Additionally, the Atascadero Community Redevelopment Agency is focused on removing blight and improving economic conditions in the redevelopment project area, particularly in the downtown zone One of the ways to encourage development is to generate capital from banks and other sources that can be used to develop commercial projects On December 9, 2008, in an effort to encourage investment in downtown and create a public-private partnership, the Community Redevelopment Agency Board directed staff to begin discussions with Mission Community Bank and other community banking partners in the area to guarantee/collateral ize loans for investment in major downtown projects including Colony Square The staff report from this meeting is attached (Attachment A) Since this time, staff has been actively working with local banks to complete a guarantee program that would facilitate loans to the Colony Square project. Update on the Colony Square Proiect There has been much discussion over the past several months regarding the status of the Colony Square Project (the "Project") To date, the Project continues to move forward Building permits for the theater building are ready to be picked up and the road and property maintenance agreements for the property are almost complete Over the past several months, cost estimates for the Project have been reevaluated, and as expected, costs have been reduced by hundreds of thousands of dollars The bulk of work recently has been on securing funding through the loan approval process from various community banks The approximately $9 5 million loan package has been approved by Mission Community Bank and is currently being considered by Santa Lucia Community Bank. Rabobank and Founder's Community Bank reviewed the loan and chose not to participate at this time Staff has requested that Rabobank review the project again Anita Robinson, CEO of Mission Community Bank, continues to inquire with other banks to find a third bank partner Once a third bank partner is in place, the Project will again return to the Agency Board for final approval of the guarantee program Should a third bank partner not be found, the remaining two banks could consider carrying the loan between the two of them or ask the Agency for a larger guarantee Each of these scenarios may be unlikely Once financing is in place, the Project will be ready to move forward and construction could be underway within one month How Does the Loan Guarantee Program Work and What Is Included in the Agreement? The loan guarantee program is really quite simple and is very similar to the SBA 7a program currently provided by the federal government. The theater building is currently being appraised at approximately $13 million upon completion A construction loan of approximately $9 5 million is needed to build the theater building and the adjacent retail locations encompassed in the building In the current credit environment, banks are unable to lend or have significant constraints on underwriting commercial special use projects such as this Further, under normal underwriting criteria, a conventional underwriting would provide a loan in the range of approximately $7 million By having the agency pledge up to an additional $1 5 million as collateral or a "guarantee," the loan amount can be brought up to approximately $8 5 million Another $1 million is being provided by the banks for tenant improvements Each of the proposed three banks participating would share the risk for the $8 million portion of the loan to Colony Square LLC (the "Borrower") In essence, each bank would provide approximately $3.2 million in funding therefore providing $9 5 million in loan proceeds, but would only be risking $2 7 million in actual funds The risk regarding the remaining $1 5 million would be assumed by the Agency The proposed program is spelled out in the attached Loan Guarantee Agreement (Attachment B) According to the agreement, an amount of up to $1 5 million would be pledged and placed into an interest bearing deposit instrument preceding the drawdown of construction funding for Colony Square and through the duration of the loan The funds would ultimately only be at risk if the Project failed and the liquidation of pledged assets were insufficient to cover the remaining loan balance As a construction loan, funds will be released methodically as construction progresses and the entire $9 5 million would only be fully loaned out at building and tenant improvement completion Consistent with a SBA 7a Loan Guarantee, the agency would collect up to a 3 75% loan guarantee fee, or $56,250 immediately upon funding of the loan The agency's total exposure is capped at $1,500,000 Reimbursement and Indemnification Agreement In preparing and negotiating the guarantee program with the banks, staff was mindful of the Agency Board's direction to protect the agency and taxpayers as much as possible While staff believes the aforementioned agreement achieves this, further protection can be received by having the owners of the Borrower (James Harrison and Peter Hilf) sign a Reimbursement and Indemnification Agreement. In essence, this agreement states that if the Borrower defaults on the loan and the Agency is required to release some or all of the $1,500,000 in pledged funds, then the borrowers must pay that amount back to the Agency within 12 months plus 10% interest per annum The agreement further provides that the Borrower and Mr Harrison and Mr Hilf are indemnifying the Agency against claims arising from or related to the Project. Mr Harrison and Mr Hilf have not yet commented on whether or not they would sign such an agreement. Financial Analysis. If the program moves forward, the redevelopment funds would need to be pledged to collateralize the loans While the money would not be expended, it would be pledged as a security and would be at risk should the loan fail to be paid per the loan agreement. Construction of the theater will undoubtedly have a positive effect on the downtown economy and will generate additional sales and property tax. FISCAL IMPACT If the Board decides to invest in the Project, up to $1 5 million of Redevelopment Agency funds would be pledged ATTACHMENTS Attachment A. December 9, 2008 Staff Report on Loan Guarantee Program Attachment B Loan Guarantee Agreement Attachment C Reimbursement and Indemnification Agreement Attachment A ITEM NUMBER RA C-1 DATE 12/09/08 Community Redevelopment Agency of Atascadero Staff Report - Executive Director Public -Private Partnership Opportunity to Encourage Downtown Investment RECOMMENDATIONS Agency - Adopt the Draft Resolution declaring that a distressed economic environment exists at 6905 EI Camino Real, and, 2 Direct staff to begin discussions with Mission Community Bank and other community banking partners in the area to guarantee/col lateral ize loans for investment in major downtown projects including Colony Square DISCUSSION Background. One of the City's primary goals is to stimulate economic development, particularly in the downtown area. Additionally, the Atascadero Community Redevelopment Agency is focused on removing blight and improving economic conditions in the redevelopment project area, particularly in the downtown zone One of the ways to encourage development is to generate capital from banks and other sources that can be used to develop commercial projects In an effort to encourage investment in downtown and create a public-private partnership, staff has been working with local community banks to determine ways that agency resources can be leveraged to spur investment. One of the tools available is to encourage loans that qualify under the Community Reinvestment Act (CRA) The CRA, passed by Congress in 1977, encourages financial institutions to help meet their communities' needs through safe and sound lending practices and by providing retail banking and community development services Federal regulators monitor whether banks are fulfilling their CRA obligations Mission Community Bank is certified by the Department of the Treasury as a Community Development Financial Institution (CDFI) Staff has been working with Mission Community Bank to put together a Community Development certified CRA - qualifying loan consortium for large-scale development projects in the downtown Because CRA loans may be more attractive to banks by helping them meet federal requirements, promoting such loans could encourage investment. Colony Square would be an example of this type of project. By adopting a resolution stating that a property is currently in a state of "financial distress," and that "economic hardship" exists, and as a result, a negative effect on the community is created, bank loans would be eligible for CRA credit. Analysis. Based on the fact that the Colony Square site currently sits, vacant, fenced and underutilized, it likely would be a candidate for a Community Development/CRA eligible loan if the City wanted to partner with community banks Specific to Colony Square, the theater building is currently being appraised at $13 million A loan of approximately $9 million is needed to build the theater building and the adjacent retail locations encompassed in the building In the current credit environment, banks are unable to lend or have significant constraints on underwriting commercial special use projects such as this Further, under normal underwriting criteria, a conventional underwriting would provide a loan in the range of approximately $7 to $7 5 million However staff believes these current barriers could be mitigated by• • Community banks coming together to share the risk • Banks receiving CRA credit • The Redevelopment Agency guaranteed or collateralized a portion of the loan If these elements existed, staff has been advised that the required loan funding might be obtained to complete this project. If the Board chose to form a partnership with the community banks in addition to adopting a resolution determining distress (Attachment A), the City may need to pledge up to $1 5 million as collateral This money would be pledged and would only be at risk if the Colony Square project failed and the liquidation of remaining assets were insufficient to cover the remaining loan balance While several details need to be worked out on how such a program might work, staff is requesting direction of the Board on whether or not such a program would be supported If the Board supports this type of program, staff is requesting that the attached resolution be adopted and that staff be given the authority to work with the local community banks on downtown development projects, and immediately with Colony Square Before agreeing to any type of loan program, the program will be brought back to the Board FINANCIAL ANALYSIS If such a program is desired by the Board, redevelopment funds would need to be pledged to collateralize the loans While the money would not be expended, it would be pledged as a security and would be at risk should the loan fail to be paid per the loan agreement. Should this situation arise, funding would be made available in the Agency's general fund for this purpose and projects would need to be cancelled or postponed Construction of the theater will undoubtedly have a positive effect on the downtown economy According to records obtained by the assessor's office, the parcel Colony Square is located on currently has an assessed value of approximately $6,700,000 The assessed value of the parcel when the Redevelopment Agency was formed was $2,602,751 The Redevelopment Agency collects property tax increment on the difference from the assessed value of the property today to the assessed value of the property when the Agency was established This amount is $4,097,249 and results in an estimated property tax increment payment of $26,000 for the Agency General Fund The site is not generating sales tax or other revenues Once the site is fully developed, the assessed value could be $40 million This number appears consistent with the project cost. At an assessed value of $40 million, property taxes would be approximately $440,000 Of this amount, the Redevelopment Agency General Fund would receive approximately $255,000 According to a conceptual staff analysis, taxable sales at the full site once built out are estimated to be $5 million annually resulting in annual sales tax payments of $50,000 Based on these estimates, the net increase in taxes resulting from the development could be as much as $305,000 per year These assumptions are based on full build -out of the project only If only the theater is built, tax increment and sales tax will be less however, the spillover effect on downtown will be significant. FISCAL IMPACT If the Board decides to invest in the Colony Square project or others, up to $1 5 million of Redevelopment Agency funds would be pledged ATTACHMENT Attachment A Resolution of Determination DRAFT RESOLUTION A RESOLUTION OF THE CITY OF ATASCADERO COMMUNITY REDEVELOPMENT AGENCY DETERMINING THAT A DISTRESSED ENVIRONMENT EXISTS ON PROPERTY THAT HAS A NEGATIVE FINANCIAL IMPACT ON THE COMMUNITY WHEREAS, The Community Reinvestment Act, passed by Congress in 1977, encourages financial institutions to help meet their communities' needs- through safe and sound lending practices and by providing retail banking and community development services, and, WHEREAS, certain properties within the Project area are economically distressed and as a result of being unsightly, underutilized, or vacant, are having a negative impact on the economic health and viability of the community; and, WHEREAS, The property located at 6905 El Camino Real, known as the Colony Square project site is currently vacant and underutilized, and, WHEREAS, The property was formerly the location of restaurants, a bowling alley, shops and professional services, all of which provided fobs and contributed to the economy and tax base, and, WHEREAS, The site currently is entitled to be a new entertainment center yet due a lack of funding, it currently sits vacant at the community's mayor intersection, and, WHEREAS, The Agency desires to see the site developed so it will once again contribute to the overall financial health of the community and benefit the local community; and, WHEREAS, The Agency understands that by determining by resolution that the site is financially distressed and negatively impacting the community in its current state that funding for future projects on the site may qualify for the Community Reinvestment Act therefore making the site more attractive to banks and lending institutions, and, WHEREAS, The purpose of this finding is to encourage banks to offer loans to the project to encourage site development. NOW, THEREFORE, The Community Redevelopment Agency of the City of Atascadero, California, does determine that the property at 6905 El Camino Real is currently contributing to the economic distress of the community, and lack of development is causing negative economic impacts. On motion by and seconded by , the foregoing Resolution is hereby adopted on the following roll call vote AYES NOES ABSTAINED - ABSENT ADOPTED ATTEST Marcia McClure Torgerson, C.M.0 Board Secretary APPROVED AS TO FORM. Brian A. Pierik, Agency Counsel ATASCADERO COMMUNITY REDEVELOPMENT AGENCY , Board Chairman Attachment B LOAN GUARANTEE AGREEMENT This agreement is made this _ day of , at San Luis Obispo, San Luis Obispo County, California between Mission Community Bank (hereinafter "Bank") and the Community Redevelopment Agency of the City of Atascadero (hereinafter "CRA") (collectively referred to hereinafter as the "Parties") WHEREAS, CRA wishes to support economic development activity in the City of Atascadero, WHEREAS, CRA is willing to provide a loan guarantee to Bank in order to assist Colony Square LLC, a California limited liability company, ("Borrower") in obtaining a construction loan for the construction of a commercial project located in Atascadero, CA, and to induce Bank to make a loan to Borrower Said loan being Loan No , evidenced by Promissory Noted dated , (hereinafter "Loan") LOAN amount is Nine Million Five Hundred Thousand Dollars ($9,500,000 00). (Copy of full Bank note is attached with referenced "Exhibit I" WHEREAS, Bank is willing to make the LOAN to Borrower in the LOAN amount on condition that CRA guarantee payment of up to the first One Million Five Hundred Thousand Dollars ($1,500,000 00) of the outstanding balance of LOAN NOW, THEREFORE the parties agree as follows 1 GUARANTEE: CRA shall guarantee payment of up to the first $1,500,000 00 of the LOAN Outstanding Balance pursuant to the provisions of this Loan Guarantee Agreement. "Outstanding Balance" is defined as the amount of principal, accrued interest and the cost of administering the LOAN or collecting the debt, accrued interest shall not include interest that otherwise would have accrued from the date of default, as that term is defined herein, until expiration of the 90 day period following default. Guarantee to be in the form of a Time Certificate of Deposit, or passbook savings account pledged to Bank and a Letter of Guarantee signed by the CRA. The pledge of Time Certificate of Deposit, passbook savings account and the signed Letter of Guarantee shall be delivered herewith. 2 LOAN GUARANTY FEE. Bank shall collect a loan guaranty fee for CRA of up to 3 75% of the guarantee amount ($56,250 00) from Borrower that shall be distributed by Bank to the CRA at closing. Bank may request a return of the loan guaranty fee upon cancellation of this agreement prior to any disbursements being made to Borrower There will be no return of the loan guaranty fee at any time after Bank has made disbursements of the guaranteed LOAN 3 DISTRIBUTION OF FEE AND INSTRUMENTS Bank shall immediately after closing distribute the guaranty fee to the CRA and submit a copy of the executed note, settlement sheet, and other instruments pertaining to the LOAN to CRA. 4 LOAN PROCESSING: Bank shall process such LOAN and take other actions consistent with prudent closing practices required to fully protect and preserve the interests of both Bank and CRA. 5 ADMINISTRATION OF LOAN Bank shall administer and service LOAN Bank will collect an annual servicing fee of up to 0 494% of any remaining guarantee amount from the Borrower and remit the same to CRA. Bank shall keep the CRA fully informed of all material aspects of the servicing of the LOAN including any default by Borrower, information concerning material changes to Borrower's financial condition and assets, and all other circumstances bearing on the risk of nonpayment of the indebtedness and the nature, scope, and extent of those risks 6 INSPECTION OF RECORDS CRA shall be entitled at any time with written notice to examine and obtain copies of all notes, security agreements, instruments of hypothecation, and all other agreements and documents, and any LOAN repayment records held by Bank which relate to the LOAN made pursuant to this agreement. 7 LOAN STATUS REPORT Bank shall complete and forward to CRA a written quarterly loan status report including but not limited to current status and repayment history of the LOAN, as requested. 8 BANK ACTION Bank will obtain written approval of CRA prior to taking any of the following actions a) renewal, compromise, extension, acceleration, or other change in the time of performance of or other change in the terms of the obligation or any part thereof; b) taking and holding security for the performance of this guarantee or the obligation guaranteed or exchange, enforcement, waiver, or release of any such security; c) application of such security and direction for the order or manner of sale thereof; d) release of Borrower 9 ASSIGNMENT Bank may not assign this guarantee in whole or in part without written approval of CRA. 10 SUBSEQUENT LOANS Bank shall notify CRA of any loan or advance by Bank to Borrower subsequent to this guaranteed LOAN Prior to such loan or advance Bank shall enter into a written agreement with CRA providing for the application of collateral (or proceeds realized therefrom) to the respective loans in the manner satisfactory to both parties. 11 PAYMENT CRA shall pay up to the full guaranteed amount to Bank within 60 days after written notice by Bank that the Deed of Trust securing the LOAN has been foreclosed and the proceeds realized from such foreclosure are insufficient to satisfy the LOAN in full. Bank shall pursue and attempt to liquidate all available collateral securing the LOAN during the 60 day period following such notice Payment of the guaranteed amount will not relieve the Bank of its obligation to continue liquidating collateral on behalf of the CRA, however, if additional liquidation expenses are incurred, Bank will be entitled to reimbursement of all such expenses from the CRA according to the following formula. amount recovered for CRA divided by the total amount recovered, multiplied by the additional liquidation expenses. For example, if CRA received $15,000 out of $100,000 recovered, and $20,000 of additional litigation expenses were incurred in the recovery, then the CRA's share of the expenses would be $3,000 [$15,000/$100,000 x $20,000 = $3,0001 Prior to the commencement of any legal/collection liquidation action, Bank shall provide CRA with a written liquidation plan stating the type of legal/collection action proposed and the estimated expense of such action and CRA must authorize in writing the proposed action and expense on a timely basis. 12. WAIVER. CRA waives to the fullest extent permitted by law (a) any defense it may acquire by reason of Bank's election of any remedy against it or borrower or both, including, without limitation or election by Bank to exercise its rights under the power of sale in any Deed of Trust securing the LOAN and the consequent loss by CRA of the right to recover any deficiency from Borrower; (b) all rights and benefits under California Code of Civil Procedure Sections 580a, and 726, to the extent these statutory Sections have any application. 13 LIMIT OF LIABILITY Liability of CRA to Bank under this loan guarantee agreement is limited to the lesser of $1,500,000 00 or, if the Borrower has made any payments against the Outstanding Balance, then an amount equal to $1,500,000 00 less the payments made by Borrower 14 SUBROGATION Upon payment to Bank of guaranteed amount of LOAN, CRA shall become subrogated to the extent of such payment to all rights which Bank had against Borrower, except to the extent of a waiver of any such rights and except to the extent CRA elects to have Bank liquidate collateral on behalf of the CRA pursuant to the provisions of Paragraph 11 of this LOAN Guarantee Agreement. 15 DEFENSES CRA retains and may assert any and all defenses of Borrower in any action brought against CRA to collect on the LOAN including any statute of limitations defense 16 ATTORNEY'S FEES In any action or proceeding brought by either party to enforce this LOAN Guarantee Agreement or any provision hereof, the prevailing party shall be entitled to all costs incurred and reasonable attorney's fees IN WITNESS WHEREOF, Bank and CRA have caused this agreement to be duly executed on the date first above written. MISSION COMMUNITY BANK DATED By - Title COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF ATASCADERO DATED By- Title y• Title Attachment C REIMBURSEMENT AND INDEMNIFICATION AGREEMENT (Atascadero, California) This Reimbursement and Indemnification Agreement ("Agreement") is entered into as of , 2009, by and between the COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF ATASCADERO ("CRA"), as the indemnified party on the one hand, and COLONY SQUARE LLC, a California limited partnership, JAMES M. HARRISON, an individual ("Harrison"), and PETER F HILF, an individual ("Hilf '), collectively on the other hand (collectively, "Indemnitors"), who for good and valuable consideration agree as follows 1 Recitals. This Agreement is made with reference to the following facts and circumstances which the parties acknowledge to be true (a) Pursuant to that certain Construction Loan Agreement dated as of , 2009 (the "Loan"), by and between Mission Community Bank (the "Lender") as lender, and Colony Square LLC (the "Borrower") as borrower [ need to confirm exact name(s) of Borrower], Borrower is borrowing from Lender the principal amount of Nine Million Dollars ($9,000,000 00) to be used for the construction of a commercial project located at El Camino Real and Santa Ysabel in the City of Atascadero, California (the "Project") , all as more particularly described in the Loan. (b) In connection with entering into the Loan with Borrower, Lender has required that CRA guarantee certain obligations of Borrower under the Loan and execute and deliver to Lender a Loan Guarantee Agreement (the "Guaranty") in the form attached hereto as Exhibit "A" (c) Harrison and Hilf have material financial interests in Borrower and will directly benefit from the making of the Loan, and Indemnitors ([Borrower], Harrison and Hilf) all desire that CRA enter into, execute and deliver the Guaranty (d) CRA is willing to enter into, execute and deliver the Guaranty provided that Indemnitors agree to the matters contained in this Agreement, including, without limitation, reimbursement and indemnification of CRA for any liability it may have under the Guaranty on the terms provided in this Agreement, and as a material inducement to CRA to enter into, execute and deliver the Guaranty, Indemnitors are willing to so agree and to so reimburse and indemnify CRA. 2 Reimbursement. If CRA at any time or from time to time shall be obligated to make, and actually does make, any payment pursuant to the terms of the Guaranty, whether voluntarily, involuntarily or pursuant to any judgment or other court order ("Guaranty Payment"), Indemnitors agree to pay to and reimburse CRA for the full amount of such Guaranty Payment with interest at 10% per annum from the date of actual payment by CRA under the terms of the Guaranty Such payment and reimbursement shall be made to CRA without abatement, deduction, offset or counterclaim within twelve (12) months following the giving of written notice by CRA to Indemnitors of the making of such Guaranty Payment; provided, that the failure of CRA to give such notice shall not release Indemnitors from their obligation to pay and reimburse CRA for the full amount of such Guaranty Payment. Such payment and reimbursement shall be made to CRA at the address to which notices to CRA are to be given pursuant to Section 8(a) of this Agreement. The obligations and agreements of Indemnitors contained in this Section 2 shall survive the expiration or termination of the Guaranty 3 Indemnification. Indemnitors agree to indemnify and hold harmless CRA, its present and future board members, officers, agents, servants and employees, and each of them, against and from any and all claims, damages, losses, liabilities, judgments, costs and expenses (including attorneys' fees and costs) which they, or any of them, may suffer or incur which arise from, relate to or are connected with the Project or any payment by or liability of CRA under the Guaranty Upon demand by any party indemnified pursuant to this Section 3 at any time, Indemnitors agree to reimburse said party for any legal or other expenses incurred in connection with investigating or defending against the foregoing. If any action, suit or proceeding arising from any of the foregoing is brought against any party indemnified pursuant to this Section 3, Indemnitors, to the extent reasonably determined by such party as necessary or advisable in order to protect the rights of such party in connection with such action, suit or proceeding, will resist and defend such action, suit or proceeding by counsel designated by CRA (which counsel shall be reasonably satisfactory to Indemnitors) The indemnities and agreements of Indemnitors contained in this Section 3 shall survive the expiration or termination of the Guaranty 4 Environmental Indemnity In addition to, and without limiting, the obligations of Indemnitors under this Agreement, Indemnitors agree to indemnify and hold harmless CRA, its present and future board members, officers, agents, servants and employees, and each of them, against and from (a) any and all claims, actions, losses, liabilities, costs and expenses, including, without limitation, all foreseeable and all unforeseeable consequential damages, directly or indirectly arising out of the use, generation, storage or disposal of Hazardous Materials on or about the Project by Colony Square LLC or any of it agents, employees, servants, contractors, customers, guests or invitees, and (b) the cost of any required or necessary action, repair, clean-up or detoxification and the preparation of any closure or other required plans to the full extent that such action is attributable, directly or indirectly, to the use, generation, storage, release, threatened release or disposal of Hazardous Materials on or about the Project by Colony Square LLC or any of its agents, employees, servants, contractors, customers, guests or invitees. As used herein, Hazardous Materials means any flammable explosives, radioactive materials, asbestos, PCBs, hazardous waste, toxic substances or related materials, including, without limitation, substances defined as "Hazardous Substances", "Hazardous Materials" or "Toxic Substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U S C Section 9601, et seq , the Hazardous Materials Transportation Act, 49 U S C Section 1801, et seq , the Resource Conservation and Recovery Act, 42 U S C. Section 6901, et seq , the Toxic Substances Control Act, 15 U S C Section 2601, et seq , any other federal, state or local law now or hereafter applicable to the Project; and in the rules and regulations now or hereafter adopted or promulgated under or pursuant to any of said laws. The provisions of this Section 4 shall survive the expiration or termination of the Guaranty 5 Obligations Absolute The obligations of Indemnitors hereunder are absolute and unconditional, and shall not be affected, diminished, impaired nor released by reason of the unenforceability or invalidity of the Loan or the existence of any defense to or right of offset res- pecting payment or performance of the obligations under the Loan which Colony Square LLC or its heirs, administrators, representatives, successors or assigns may now possess or hereafter have, it being the express intent of the parties hereto that Indemnitors be obligated to provide reimbursement, payment and indemnity as herein provided notwithstanding any such unenforceability, invalidity, defense or right of offset, including but not limited to, (i) any defense that may arise by reason of Lender's election of any remedy to enforce the Loan against Borrower, including, without limitation an election by Lender to exercise its rights under the power of sale in any Deed of Trust securing the Loan, (ii) any rights and benefits that may anse in favor of Borrower under California Code of Civil Procedure Sections 580a, 580b, 580d, and 726, to the extent these statutory Sections may have any application, (iii) all rights and benefits under Civil Code Section 2809 purporting to reduce a guarantor's obligation in proportion to the principal obligation, or (iv) any defense based on any statute or rule of law that provides that the obligation of a guarantor must be neither larger in amount or in any other respects more burdensome than that of a principal. 6 Notices to CRA. Indemnitors shall immediately give to CRA a complete copy of any notice given by Lender, or its successors or assigns, to Indemnitors, including, without limitation, any notices of nonperformance or default with respect to the Loan, and a complete copy of any notice given by Indemnitors, or any of them, to Lender, its successors or assigns 7 Guaranty Fee In consideration of and as a material inducement to CRA to enter into, execute and deliver the Guaranty, and in consideration thereof, Indemnitors agree to pay the Loan Guaranty Fee and annual servicing fee for the CRA's guarantee as specified in the Guaranty ("Guaranty Fee") Payment of the Guaranty Fee shall be made without counterclaim, abatement, deduction or offset. The obligations and agreements of Indemnitors contained in this Section 7 shall survive the expiration or termination of the Guaranty Mi,cel l an eons, (a) Notices. All notices which any party is required or desires to give hereunder shall be in writing and shall be deemed given when delivered personally or three (3) days after mailing by registered or certified mail (return receipt requested) to the following address or at such other address as the parties may from time to time designate by written notice in the aforesaid manner - If to CRA. Community Redevelopment Agency City of Atascadero Atascadero, CA 93422 Attention If to Indemnitors (b) BindingEffect. ffect. This Agreement shall be binding upon and inure to the benefit of each party to this Agreement and their respective heirs, administrators, representatives, successors and assigns, provided, that Indemnitors shall not assign any of their rights or obliga- tions under this Agreement. (c) No Waiver; Remedies Cumulative No failure or delay by CRA in exercising any remedy, right, power or privilege under or with respect to this Agreement shall operate as a waiver of such remedy, right, power or privilege, nor shall any single or partial exercise of any such remedy, right, power or privilege preclude any other or further exercise of such remedy, right, power or privilege, or the exercise of any other remedy, right, power or privi- lege No remedy, right, power or privilege of CRA under or with respect to this Agreement is intended to be exclusive of any other such remedy, right, power or privilege of CRA but each shall be cumulative and in addition to every other such remedy, right, power or privilege of CRA and each may be exercised concurrently or independently from time to time and as often as may be deemed expedient by CRA. (d) Amendment. The terms and provisions of this Agreement may not be amended, modified or waived, except by an instrument in writing signed by the parties. (e) Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements, whether written or oral, with respect thereto (f) Severability If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (g) Late Payment. Any amounts required to be paid to CRA hereunder which are not paid when due shall bear interest from the date due until actually paid at the rate of ten percent (10%) per annum. (h) Attorneys' Fees and Costs. In addition to the amounts to be reimbursed under this Agreement, Indemnitors jointly and severally agree to pay reasonable attorneys' fees and all other costs and expenses incurred by CRA in enforcing this Agreement in any action or proceeding ansing out of, or relating to, this Agreement. (i) Construction and Interpretation of Agreement. The parties agree that this Agreement was jointly prepared through negotiations of the parties and the provisions of the Agreement are not to be strictly or liberally construed for or against any of the parties. The titles to the sections and subsections of this Agreement are inserted for convenience only and are not a part of this Agreement and shall have no effect upon the construction or interpretation of any part of this Agreement. This Agreement shall be governed by and construed in accordance with the substantive and procedural laws of the State of California. 0) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute but one and the same instrument. (k) Joint and Several Obligations. Each and all of the agreements, obligations and liabilities of Indemnitors hereunder are point and several IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. COLONY SQUARE LLC COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF ATASCADERO Utz (Print Name) (Print Name) (Print Title) (Print Title) JAMES M. HARRISON PETER F HILF