POINT ARENA CITY COUNCIL
AGENDA ITEM SUMMARY
AGENDA ITEM: VIII A
MEETING DATE: 8/27/2024
TITLE
Resolution 2024-22 Approving the use of the Old Firehouse Located at 247 Main Street (APN# 027-111-26) as Collateral to Secure a Term Loan in Place of Existing Line of Credit with Redwood Credit Union
RECOMMENDED ACTION
Approve Resolution 2024-22 of the Point Arena City Council Approving the Old City Fire Station as Collateral to Secure a Term Loan in Place of the Existing Line of Credit With Redwood Credit Union
ANALYSIS
In October 2021, Redwood Credit Union approved a non-revolving Business Line of Credit for the City Point Arena. The City’s intent was to use this Credit Line to fund construction of various City infrastructure projects, including the repaving of Mill Street. These infrastructure projects already had grant funding approved. However, these grants required the City to make the necessary payments to consultants and contractors out of City financial resources. Once payment is made, the City then submits reimbursement claims to the granting agency for the City’s payments to contractors and consultants.
For a City as small as Point Arena, carrying the cost of a large infrastructure project significantly impacts the City’s cash flow, and creating hardship regarding payment of other City obligations, including payroll. This Line of Credit was used to design and construct necessary infrastructure projects while waiting out the grant reimbursement process, which can take months sometimes.
In 2020, the City began design and construction activities for repaving Mill Street. When construction began, the project encountered significant unexpected problems under the street that increased the repaving costs that were not included in the grant funding. The project exceeded the grant amount by approximately $300,000 which was paid with the Line of Credit.
In early 2024, Redwood Credit Union asked, and the City agreed to convert the Line of Credit to a Term Loan in the amount of $310,439.77. Redwood Credit Union requested, and the City agreed to provide collateral to secure the Term Loan. The City has identified the Old City Fire House located at 247 Main Street, Point Arena, CA, 95862; Parcel ID: 027-111-26-00 as the required collateral. The Resolution documents the City’s approval to use this property for collateral.
FISCAL IMPACT
Loan Repayment is expected to be approximately $3,800 per month over a 10-year term.
ATTACHMENTS
1. Resolution #2024-22
CITY MANAGER SIGNATURE
_______________________________
Peggy Ducey
Interim City Manager
RESOLUTION NO. 2024-22
A RESOLUTION OF THE POINT ARENA CITY COUNCIL AUTHORIZING
THE ENCUMBRANCE OF AN EXISTING BANK DEBT BY SECURING IT
WITH A FREE AND CLEAR COMMERCIAL REAL ESTATE ASSET
WHEREAS, the City of Point Arena (the "City") is the legal owner of certain commercial real estate described as the Old City Fire House located at 247 Main Street, Point Arena, CA, 95862; Parcel ID: 027-111-26-00 (the "Property"), which is free and clear of any liens, encumbrances, or other debts; and
WHEREAS, the City currently holds an outstanding bank debt in the amount of $310,439.77with Redwood Credit Union (the "Existing Debt"); and WHEREAS, it is in the best interest of the City to secure the Existing Debt by encumbering the Property as collateral to obtain more favorable terms, reduce interest rates, extend the payment period, or for other financial benefits; and WHEREAS, the City Council has determined that such action will not impair the City's ability to fulfill its obligations or affect the public interest adversely; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Point Arena as follows:
1. Authorization to Encumber Property
The City Council hereby authorizes the encumbrance of the Property located at 247 Main Street, Point Arena, CA, 95862; Parcel ID: 027-111-26-00 as collateral for the Existing Debt with Redwood Credit Union.
2. Approval of Terms
The City Council approves the terms and conditions of the amended debt agreement as negotiated with Redwood Credit Union, including but not limited to a fixed interest rate of
7.15%, amortized over 10 years for a monthly payment of approximately $3,800, and without any prepayment penalty.
3. Authorization for City Officials
The City Council hereby authorizes the Interim City Manager to execute all necessary documents, agreements, and instruments required to secure the Existing Debt with the Property, including but not limited to, signing deeds of trust, promissory notes, and any related legal documents.
3. Effective Date
This Resolution shall take effect immediately upon its adoption.
The above and foregoing Resolution 2024-22 was passed and adopted at the regular meeting of the City Council of the City of Point Arena held on the 27th day of August 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Barbara Burkey, Mayor
ATTEST:
Paul Andersen, City Clerk