SR-413-002 (3)
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JAN 101989
FI:CMD:BR:as:sretopn
Council Meeting: 1/10/89
Santa Monica, Californla
TO: CITY COUNCil AND REDEVELOPMENT AGENCY
FROM: City and Agency Staff
SUBJECT: EXTENSION OF TIME FOR OUTSTANDING PROMISSORY NOTES
IntroductlOn
The City of Santa Monica holds six Promissory Notes, two for the Downtown
Project and four for the Ocean Park ProJect, for funds loaned to the
Redeve 1 opment Agency by the C Hy. These notes, 1 ast renewed by the Agency
January 1, 1988, need to be renewed for the 1989 calendar year effective
January 1, 1989.
Background
The City has loaned the Agency funds for various administratlve, operational
and miscellaneous expenses. These loans have been formalized in the form of
Promissory Notes with payment due annually. If payment ln full is not
received by the Clty, it is necessary that the Notes be renewed.
Attachment I detalls the financlal hlstory of each of the promissory notes,
lncludlng amounts repaid to date, and presents the sources and uses of
budgeted FY1988/89 Redevelopment Agency income. Through June 30, 1988,
approxlmately 53.4 milllOn (lncluding a $1.6 milllon repayment made dunng
FY1987/88) has been repaid on these Notes.
Repayments WhlCh may be scheduled for FY1989/90 will be determined as part of
the regular budget process.
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JAN 1 0 1989
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Budget/F1nancial Impact
There lS no budgetary impact result1ng from the renewal of these Prom1ssory
Notes. The flnancial lmpact is to lncrease the liability of the Agency by
$998,191.34 Whl ch represents net accrued interest for the pen od January 1,
1988 through December 31, 1988 (see Attachment II). Continuing the policy
adopted last year by Council, staff once agaln recommends that the interest
rate for five promissory notes be one-half of one percentage point (.5%) more
than the City's actual rate of investment earnings for calendar year 1989.
The additional .5% is to reimburse the City for carrying this debt. As
requlred ;n t~e original bond covenant, the sixth promissory note must
contlnue at the same rate of interest, 7.75%, as the Downtown Redevelopment
Project Parklng Lease Revenue Bonds.
Recommendation
It is recommended that:
(A) the City Councll agree to renew the six loans to the Redevelopment Agency
and to accept the attached Promissory Notes; and
(B) the Redevelopment Agency approve and authorize the Chairperson to execute
the six attached Promissory Notes between the Agency and the City,
extendlng the loans for the 1989 calendar year.
Prepared by: Mlke Dennis, Director of Finance
Louise Baker, Accounting Manager
8111 Jlas, Senlor Accountant
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Attachment I
STATUS OF REDEVELOPMENT AGENCY PROMISSORY NOTES
I. History of Promissory Notes
The followlng indicates the original debt amount of each of the SlX promissory
notes between the Redevelopment Agency and the City, and the total net accrued
interest for each promlssory note as of 12/31/88; the history of note payments
1S footnoted by promissory note.
Promi ssory
Note
Number
Origlnal
Debt
Amount
(date)
Total Accrued
Interest
Through
12/31/88
Promissory
Note
Balance
1/1/89
Downtown Project
1. Downtown
Redevelopment
Project $ 871,840.00 $ 199,324.30(9) $1,071,164.30
(6/30/81) (a)
6. Downtown
Redevelopment
ProJect $4,400,000.00
(10/24/78) (f) $3~210,488.36(h) $7~610,488.36
Sub-total $5,271,840.00 $3,409,812.66 $8,681,652.66
Ocean Park Project
2. Ocean Park
Project $1,243,266.88 $ 909,120.31(i) $2,152,387.19
(6/30/81)(b)
3. Ocean Park
Project $ 824,449.00 $ 481,137.88(j) $1,305,586.88
(1/1/82)(c)
4. Ocean Park
Project $ 772,568.08 $ (95,876.31)(k) $ 676,691.77
(9/13/83) (d)
5. Ocean Park
ProJect $ 280,837.00 $ (34,983.77)(1) $ 245,853.23
(9/14/83) (e)
Sub-total $3,121,120.96 $1 ~ 259,398.11 $ 4,380,519.07
Total $8,392,960.96 $4,669,210.77 $13 ,062,171. 73
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Notes:
(a) and (c) represent General Fund funds advanced to the Agency for vari ous
adm1nlstrative and other expenses as of 6/30/81 (per Agency Resolution 371t
1/12/82) .
(b) Represents City CDBG funds advanced to the Agency for the payment of
interest on outstanding Federal proJect notes (per Agency Resolution 371,
1/12/82).
{d} Represents General Fund funds advanced to the Agency to payoff the
outstand1ng Federal Ocean Park Urban Renewal Grant Note.
(e) Represents City COaG funds held by the Federal government and applied to
payoff the outstanding Federal Ocean Park Urban Renewal Grant Note.
{f} Represents the value of various parcels of property transferred from the
City to the Agency for the Downtown Redevelopment Project (per Agency
Resolution 352, 10/24/78).
(g) Reflects payments of $150tOOO in FY1983/84 and $347,548 1n FY1986/87.
(h) Reflects payment of $1,149,452 in FY1986/87
(i) Refl ects payment of $183,000 in FY1984/85 and $445,779 in interest in
FY1987/88
(j) Reflects payment of $365,000 of prlmarily 1nterest in FY1987/88
( k) Reflects payment of $S63t975 ln interest and principal in FYl987/88
(1) Reflects payment of $205,011 in interest in FY19B7/B8
II. FY1988/89 F1nancial Abil ity of Redevelopment Agency to Repay Prom1ssory
Notes
The following table summarizes (in millions) the budgeted sources and uses of
Redeve10pment Agency lncome for FYl9S8/B9. As this table indicates, Agency
income is not available at this t1me to effect further repayment of Agency
debt to the City.
Sources
Downtown
Project
Ocean Park
ProJect
Total Sources
$1.2
1.2
$2.4
$1.4
Tax Increment and Interest
Clty Lease Payment for
Parking Structures*
$1.4
*Th1S lease payment is made by the General Fund to the Redevelopment Agency.
The General Fund payment 1S fwanced by: a) $.6 mi1l1on payment from Santa
MOnlca Place to offset lost property taxes due to Proposition 13; b) $.1
m11lion payment from Santa Monica Place for sublease of parking structures;
and c) $.5 m1llion payment from Redevelopment Agency for putt1ng credit of the
General Fund behind the 1978 bond issue.
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Uses
Salanes
Supplles & Expenses
Capital Projects
Total Uses
$ .1
2.0*
.4**
$ .1
.9*
.4**
$2.5
$1.4
*Consists of the following costs: Downtown Project - a) $1.1 mlllion debt
service payment on 1978 bonds; b) $.5 million payment to the General Fund for
putting credit of the General Fund behind the Redevelopment Agency's 1978 bond
lssue; c) $.1 milllOn earthquake lnsurance on Parking Structures; d) S.1
mllllon payment to the General Fund for various adminlstrative support
serVlces; e) $.1 mllllon reimbursement to Housing staff for operatlOns of
beneflt to the project area, and f) $.1 milllon in Redevelopment Agency other
operatlng expenses appllcable to the project area; and Ocean Park Project - a)
$.5 million debt serVlce on 1988 refunded bonds; b) $.1 milllon payment to the
General Fund for varlOUS adminlstratlve support services; c) $.1 mlllion
annua 1 1 ease payment to Parki ng Authori ty for development of 175 Ocean Park
Boulevard; d) $.1 mll1ion rembursement to Houslng staff for operations of
benefit to the proJect area, and d) $.1 million in Redevelopment Agency other
operatlng expenses applicable to the project area.
**Conslsts of the followlng capital proJects: a) Downtown Project - $.3
million for housing projects of benefit to the project area, and S.1 milllon
for removal of debris from the Airport which was originally generated by the
project area; and b} Ocean Park Project - $.1 million for POP plllngs removal
and $.3 mlllion for housing projects of benefit to the project area.
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Attachment II
Clty of Santa Monlca
Extension of Tlme for Outstanding Notes*
Promissory Accrued Princlpal Promissory
Note Interest and Interest Note
Promi ssory Balance 1-1-88 Paid Balance
Note Number 1-}-88 12-31-88 4-21-88 1-1-89
Downtown Projects
1. Downtown $ 989~442.96 $ 81,721.34 S -0- $1,071,164.30
Redevelopment
ProJect**
6. Downtown 7,063,098.25 547,390.11 -0- 7,610,488.36
Redevelopment
Project******
Sub-total
Downtown
Project $81052,541.21 $629,111.45 $ -0- $8,681,652.66
Ocean Park Project
2. Ocean Park $2,424,113.74 $174,052.82 $ 445,779.37 $2,152,387.19
Federa 1
Allocation***
3. Ocean Park 1~562,921.80 107,665.08 365,000.00 1,305,586.88
Federal
Allocation**
4. Ocean Park 1,176,587.76 64,078.71 563,974.70 676,691. 77
Federal
Allocation****
5. Ocean Park 427,580.96 23,283.28 205,011.01 245,853.23
Federal
All ocat i on*****
Sub-total
Ocean Park
Project $ 5,591,204.26 $369,079.89 $ 1,5791765.08 $ 4,380,519.07
Total $13,643,745.47 $9981191. 34 $ 11579,765.08 $13,062,171. 73
* Effectlve January 1, 1989 Notes 1 through 5 wlll carry an 1nterest rate
one half a percentage pOlnt {.5%} h1gher than the City's actual rate of
lnvestment earnings for calendar year 1989. However, note 6 will
continue to carry an lnterest rate of 7-3/4%~ as requwed by the
Resolut1on of the Agency acknowledging the debt. This 1S the same rate
of interest on the Downtown Redevelopment Project Parking Lease Revenue
Bonds.
** Relmbursement for various administrative support and service costs;
owed to C1ty'S General Fund.
*** Reimbursement of CDBG funds used to pay interest on outstanding Federal
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*****
******
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Urban Renewal Loan Note; owed to City's CDBG Fund.
Close out of Ocean Park Federal Urban Renewal Project; owed to the
City's General Fund.
Close out of Ocean Park Federal Urban Renewal Project; owed to the
City's CDBG Fund.
Represents the val ue of vari ous parcel s of property transferred from
the City to the Agency for the Downtown Redevelopment Proj ect (per
Agency Resolution 352, 10/24/78). Owed to General Fund.
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