Memorandum

City of Lawrence

City Manager’s Office

 

DATE:

October 3, 2013

TO:

David L. Corliss, City Manager

FROM:

Casey Toomay, Budget Manager

CC:

Cynthia Wagner, Assistant City Manager

Diane Stoddard, Assistant City Manager

Jonathan Douglass, Assistant to the City Manager / City Clerk

RE:

Lawrence Community Shelter Loan Request

 

Please place the following item on the City Commission agenda for consideration at their October 8 meeting:

 

Authorize City Manager to enter into an agreement with the Lawrence Community Shelter, for a $725,000 loan.

 

Background

As part of the 2014 budget process, the City Commission received a request for a loan from the Lawrence Community Shelter.  The loan would be repaid over time at a lower interest rate than the Shelter was currently receiving from their bank, reducing their expenses. 

 

A draft agreement was prepared and reviewed by the City Commission at their meeting on September 17, 2013.  At that meeting there was discussion as to whether or not to secure the City’s interest in the property by obtaining a mortgage. 

 

Staff has prepared two agreements for consideration of the Commission.  LCS has reviewed these two options and is agreeable to either.   

 

Agreement Terms

Both draft agreements contain the following terms:

·         The loan would be for $725,000 to be used to repay Peoples Bank and to repair the roof at the new facility;

·         The first $225,000 of the loan would be interest free, provided it is paid back by October 31, 2014;

·         The remaining $500,000 plus 2% interest, would be paid back in 180 equal payments of $1,848, with a balloon payment of $287,191 due in January of 2029.  (If none of the first $225,000 is paid by October 31, 2014, the monthly payments would be $2,680 with a balloon payment of $191,427.)

·         Should LCS fail to make payments, the City reserves the right to withhold funding for operations. 

 

The two agreements differ with regard to what degree the City wishes to secure our interest in the property.  Under the terms of one agreement, the City would obtain a mortgage on and against the property. 

Under the other agreement, the City would not obtain a mortgage, however, LCS would agree not to sell or lease, or encumber or seek to encumber the property without the prior approval of the City. 

 

Additional Option - Assignment

It may also be possible for Peoples Bank to assign their mortgage and title coverage to the City.  This would avoid the cost of mortgage registration tax and title insurance (estimated at between $2,800 and $3,200.) 

 

Should the Commission direct staff to pursue this option, additional conversations with Peoples Bank would need to occur and an alternative agreement would need to be drafted and brought back to the Commission in the future. 

 

Action Item

Authorize City Manager to enter into an agreement with the Lawrence Community Shelter, for a $725,000 loan.