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CITY COMMISSION AGENDA ITEM |
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Department: |
City Manager’s Office |
Commission Meeting Date: April 18, 2017 |
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Staff Contact: |
Casey Toomay, Assistant City Manager |
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Recommendations/Options/Action Requested: |
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Approve a request from the Lawrence Community Shelter, Inc. to forgive a portion of their $725,000 loan and, if appropriate, direct staff to draft an amendment to the 2013 Loan Agreement. |
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Executive Summary: |
In February of 2017, the City received a request from the Lawrence Community Shelter, Inc. (LCS) to forgive the remaining balance on the loan they received in 2013. City staff met with John Tacha, Jr., the President of the Board of Directors for LCS and John Magnuson, the LCS Board Treasurer, to discuss this request and provided a recommendation on how to proceed. This meeting was followed with a letter from the City Manager to LCS, outlining a proposed course of action.
A formal request was then submitted by Trey Meyer, Executive Director of LCS requesting that the City forgive 1/11 of the remaining balance each year, with appropriate adjustments to the amortization schedule for the balance remaining after such reduction, such that, the balance on the loan will be $0 at the end of 2028. In that request, Mr. Meyer also responded to concerns that LCS previously committed to not asking for additional funding from the City. Also addressed were questions about a previous commitment to seek alternative sources of revenue, including the option of charging residents a modest stipend when those residents were employed.
Staff recommends the City amend the 2013 Loan Agreement with Lawrence Community Shelter, Inc. to forgive 1/11 of the estimated 2028 balloon payment. Assuming LCS makes an annual request that is approved by the Commission for the remainder of the term of the agreement, the balloon payment would be extinguished by December of 2028.
Because the interest component of the payment was based on a 30 year amortization schedule rather than a fifteen year period, extinguishing the principle portion of the loan sooner would not change the amount of interest paid and therefore there would be no impact on the monthly payment amount. Staff does not recommend adjusting the amortization schedule further.
If approved, staff will draft an amendment to the Loan Agreement for consideration at a future Commission meeting.
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Strategic Plan Critical Success Factor |
Collaborative solutions |
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Fiscal Impact (Amount/Source): |
The fiscal impact to the City will be a decrease of approximately $287,211 in 2028. The City funded the original loan from the City’s General Operating Fund and Special Alcohol Fund with the intent of reimbursing the General Operating Fund first. Therefore, the impact of forgiving the loan payment will be to the Special Alcohol Fund. This item was not budgeted in 2017 and should be considered in the context of the 2018 budget. |
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Attachments: |
Staff Report - Updated 04/14/17 Proposed Amortization Schedule 04/11/17 – Correspondence from John Tacha, Sr. 03/30/17 – LCS Response to Markus Letter 03/30/17 – Follow up email to LCS 03/17/17 – Follow up letter from Tom Markus to LCS 03/14/17 – Letter from Tom Markus to LCS 02/15/17 – Request from LCS Board President John Tacha, Jr. 10/30/15 Agreement to provide emergency funding Minutes from 7/14/15 City Commission meeting re: emergency funding request Minutes from 7/7/15 City Commission meeting re: emergency funding request Minutes from 12/3/13 City Commission meeting re: loan agreement Minutes from 10/8/13 City Commission meeting re: loan agreement Minutes from 09/17/13 City Commission meeting re: loan agreement 05/23/13 – Request from LCS for loan agreement
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Reviewed By: (for CMO use only) |
☐TM ☐DS ☒CT ☐BM |