Memorandum

City of Lawrence

City Manager’s Office

DATE:	UPDATED 12/3/13
TO:	David L. Corliss, City Manager
FROM:	Casey Toomay, Budget Manager
CC:	Cynthia Wagner, Assistant City Manager Diane Stoddard, Assistant City Manager
RE:	Agreement with Lawrence Community Shelter

Please place the following item on an agenda for consideration of the City Commission. 

Consider authorizing a loan agreement between the City and Lawrence Community Shelter in the amount of $725,000 plus interest.

Background

The Lawrence Community Shelter (LCS) requested a thirty year loan in the amount of $725,000 at 2% interest to be used as follows:

· To pay the balance of a construction loan through People Bank in the amount of $627,098.82;

· To pay for repair work to the roof of the Lawrence Community Shelter facility. 

At their meeting on October 8, the City Commission discussed a draft agreement for the loan.  The City Commissioner agreed that the City should secure a mortgage on the property.  They also agreed that LCS should have to seek prior permission from the City before selling, leasing, or otherwise encumbering the property.  Staff was directed to investigate the option of assignment of the existing mortgage held by Peoples Bank and to revise the agreement accordingly. 

Assignment of Existing Mortgage vs. Filing New Mortgage

By acquiring the assignment of the existing the mortgage, the City gains the rights, privileges, and powers under the existing mortgage and promissory note held by Peoples Bank.  The existing title insurance is also assigned.  The advantage to the assignment of the existing mortgage is that the cost is much lower than filing a new mortgage.  A comparison is provided below.

	Assignment of Existing Mortgage	Filing of New Mortgage
Bank Assignment Fee	$250	NA
Recording Fee with Register of Deeds	$32	$32
New Title Insurance / Assignment of existing title insurance	$150	$1,337
Mortgage Registration Tax		$1,885
Estimated Total	$432	$3,254

Other Terms of the Agreement

The remaining terms of the agreement (revised 12/03/13) remain the same as the draft previously reviewed by the Commission.  The Shelter will repay the first $225,000 of the loan within the next twelve months.  The remaining $500,000 will be repaid, plus interest, in monthly installments of $1,848 until December of 2018 at which time the remaining unpaid balance shall be paid in a lump sum to the City. 

Under the proposed agreement, the City reserves the right to withhold or reduce future payments to LCS in the event they fail to make their monthly payments.  LCS will provide the City with documentation that work on the roof is underway. 

Funding

The City Commission previously amended the 2013 budget in order to provide sufficient budget authority in the Special Alcohol Fund to pay for $300,000 of the loan.  Fund balance in the General Operating Fund will be used to pay for the remaining $425,000 of the loan.

Action Requested

Staff requests the Commission consider authorizing a loan agreement between the City and Lawrence Community Shelter in the amount of $725,000 plus interest.