City Council Agenda Report
TO: Mayor Clauzel and Members of the City Council
FROM: Ken Irwn, City Manager
BY: Nubia Goldstein, City Attorney
MEETING DATE: August 20, 2024
ITEM NO: 9.3
SUBJECT: Approve Resolution No. 2024-48 Authorizing a Second Amended Promissory Note Secured by Deed of Trust between borrower Darron Silva (“Silva”) and lender City of Patterson (“City”).
RECOMMENDATION
Motion to Approve Resolution No. 2024-48 Authorizing a Second Amended Promissory Note Secured by Deed of Trust between borrower Darron Silva (“Silva”) and lender City of Patterson (“City”).
BACKGROUND
On November 21, 2018, Silva executed a Promissory Note Secured by Deed of Trust (“Promissory Note”) promising to repay a loan from the City in the amount of $1,045,000 for Silva to purchase the Cali Kosher facility at 520 Park Center Drive, Patterson, CA 95363. Under the terms of the Promissory Note, Silva was required to make fixed monthly payments for a fiveyear term. A final balloon payment consisting of any outstanding principal and interest was due on August 1, 2023.
On March 22, 2019, Silva executed an Amended Promissory Note Secured by Deed of Trust (“Amended Promissory Note”) with the same terms as the original Promissory Note, but the final balloon payment due date was extended to August 1, 2024.
On June 3, 2024, Cali Kosher’s counsel contacted the City requesting to extend the term of the Amended Promissory Note for an additional five years, with the final balloon payment due on August 1, 2029. Cali Kosher’s counsel also requested to renew Cali Kosher’s Development Agreement with the City for an additional five years. The request cited the challenging market conditions since late 2021, while also expressing Cali Kosher’s intent to continue operations of its cannabis business.
DISCUSSION
Silva has made all of the payments required under the Amended Promissory Note, and the City expects that Silva will continue making payments if the Amended Promissory Note terms are extended for another five years. The City benefits from Cali Kosher’s ongoing operations through community benefit fees under the Development Agreement. It is in the City’s interest to work with Silva on a loan agreement that allows Silva to continue making payments on the loan while continuing Cali Kosher operations.
A Second Amended Promissory Note Secured by Deed of Trust (“Second Amended Promissory Note”) has been prepared with the same terms as the existing Amended Promissory Note, with the exception of an additional five-year term and an extension of the final balloon payment date to August 1, 2029.
FISCAL IMPACT
Under the terms of the proposed Second Amended Promissory Note, the City will continue to receive monthly payments of principal and interest for an additional five years, and the balloon payment due date for any remaining principal and interest will be extended from August 1, 2024, to August 1, 2029.
POLICY ALTERNATIVES:
The City Council’s options are:
1. Adopt the Resolution No. 2024-48 without any changes; or
2. Adopt the Resolution No. 2024-48 with changes and revisions; or
3. Reject the Resolution No. 2024-48 entirely.
ATTACHMENTS:
Resolution No. 2024-48
Second Amended Promissory Note Secured by Deed of Trust (Exhibit A to Resolution)